U.S. Supreme Court, Abitron Austria GmbH v. Hetronic Int’l, Inc., Docket No. 21-1043, 600 U.S. 412

Extraterritoriality

 

Presumption Against Extraterritoriality

 

Conflict of Laws

 

Foreign Law

 

International Relations

 

Trademark Infringement

 

Circuit Split

 

 

 

 

This case requires us to decide the foreign reach of 15 U.S.C. §1114(1)(a) and §1125(a)(1), two provisions of the Lanham Act that prohibit trademark infringement. Applying the presumption against extraterritoriality, we hold that these provisions are not extraterritorial and that they extend only to claims where the claimed infringing use in commerce is domestic. 

 

§1114(1)(a) prohibits the unauthorized “use in commerce of any reproduction . . . of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services” when “such use is likely to cause confusion.” 

 

§1125(a)(1) prohibits the “use in commerce” of a protected mark, whether registered or not, that “is likely to cause confusion.”

 

We granted certiorari to resolve a Circuit split over the extraterritorial reach of the Lanham Act. 598 U.S. ––– (2023).

 

“It is a `longstanding principle of American law “that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.” '” Morrison v. National Australia Bank Ltd., 561 U.S. 247, 255 (2010). We have repeatedly explained that this principle, which we call the presumption against extraterritoriality, refers to a “presumption against application to conduct in the territory of another sovereign.” Kiobel v. Royal Dutch Petroleum Co., 569 U.S. 108, 119 (2013) (citing Morrison, 561 U.S., at 265). In other words, exclusively “`foreign conduct is generally the domain of foreign law.'” Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 455 (2007) (alteration omitted). The presumption “serves to avoid the international discord that can result when U.S. law is applied to conduct in foreign countries” and reflects the “`commonsense notion that Congress generally legislates with domestic concerns in mind.'” RJR Nabisco, Inc. v. European Community, 579 U.S. 325, 335–336 (2016).

 

Applying the presumption against extraterritoriality involves “a two-step framework.” Id., at 337. At step one, we determine whether a provision is extraterritorial, and that determination turns on whether “Congress has affirmatively and unmistakably instructed that” the provision at issue should “apply to foreign conduct.” Id., at 335, 337; accord, Kiobel, 569 U.S., at 117 (asking whether Congress “intends federal law to apply to conduct occurring abroad”); Nestlé USA, Inc. v. Doe, 593 U.S. –––, ––– (2021). If Congress has provided an unmistakable instruction that the provision is extraterritorial, then claims alleging exclusively foreign conduct may proceed, subject to “the limits Congress has (or has not) imposed on the statute's foreign application.” RJR Nabisco, 579 U.S., at 337–338.

 

If a provision is not extraterritorial, we move to step two, which resolves whether the suit seeks a (permissible) domestic or (impermissible) foreign application of the provision. To make that determination, courts must start by identifying the “` “focus” of congressional concern' ” underlying the provision at issue. Id., at 336. “The focus of a statute is `the object of its solicitude,' which can include the conduct it `seeks to “regulate,”' as well as the parties and interests it `seeks to “protect” ' or vindicate.” WesternGeco LLC v. ION Geophysical Corp., 585 U.S. –––, ––– (2018) (alterations omitted).

 

Step two does not end with identifying statutory focus. We have repeatedly and explicitly held that courts must “identify `the statute's “focus” ' and ask whether the conduct relevant to that focus occurred in United States territory.” Id., at ––– (emphasis added); accord, e.g., RJR Nabisco, 579 U.S., at 337. Thus, to prove that a claim involves a domestic application of a statute, “plaintiffs must establish that `the conduct relevant to the statute's focus occurred in the United States.'” Nestlé, 593 U.S., at ––– – ––– (emphasis added); see, e.g., WesternGeco, 585 U.S., at ––––––– (holding that a claim was a domestic application of the Patent Act because the infringing acts—the conduct relevant to the focus of the provisions at issue—were committed in the United States); Morrison, 561 U.S., at 266–267, 271–273 (concluding that a claim was a foreign application of the Securities and Exchange Act because the “purchase-and-sale transactions” at issue occurred outside of the United States).

 

Step two is designed to apply the presumption against extraterritoriality to claims that involve both domestic and foreign activity, separating the activity that matters from the activity that does not. After all, we have long recognized that the presumption would be meaningless if any domestic conduct could defeat it. See Morrison, 561 U.S., at 266. Thus, “`if the conduct relevant to the statute's focus occurred in the United States, then the case involves a permissible domestic application' of the statute, `even if other conduct occurred abroad.'” WesternGeco, 585 U.S., at ––– (quoting RJR Nabisco, 579 U.S., at 337). And “if the relevant conduct occurred in another country, `then the case involves an impermissible extraterritorial application regardless of any other conduct that occurred in U.S. territory.'” WesternGeco, 585 U.S., at ––– (quoting RJR Nabisco, 579 U.S., at 337). Of course, if all the conduct “`regarding the violations `took place outside the United States,'” then courts do “not need to determine . . . the statute's `focus'” at all. Id., at 337. In that circumstance, there would be no domestic conduct that could be relevant to any focus, so the focus test has no filtering role to play. See, e.g., Nestlé, 593 U.S., at –––; Kiobel, 569 U.S., at 124.

 

With this well-established framework in mind, the first question is whether the relevant provisions of the Lanham Act, see §§ 1114(1)(a), 1125(a)(1), provide “a clear, affirmative indication” that they apply extraterritorially, RJR Nabisco, 579 U.S., at 337. They do not.

 

(…) When applying the presumption, “`we have repeatedly held that even statutes . . . that expressly refer to “foreign commerce” '” when defining “commerce” are not extraterritorial. Morrison, 561 U.S., at 262–263; see also RJR Nabisco, 579 U.S., at 344.

 

See Kiobel, 569 U. S., at 118 (“It is well established that generic terms like `any' or `every' do not rebut the presumption against extraterritoriality”). And the mere fact that the Lanham Act contains a substantively similar definition that departs from the so-called “boilerplate” definitions used in other statutes cannot justify a different conclusion either.

 

In other words, Congress proscribed the use of a mark in commerce under certain conditions. This conduct, to be sure, must create a sufficient risk of confusion, but confusion is not a separate requirement; rather, it is simply a necessary characteristic of an offending use.5 Because Congress has premised liability on a specific action (a particular sort of use in commerce), that specific action would be the conduct relevant to any focus on offer today. See, e.g., WesternGeco, 585 U.S., at ––– – –––.

 

In sum, as this case comes to us, “use in commerce” is the conduct relevant to any potential focus of §1114(1)(a) and §1125(a)(1) because Congress deemed a violation of either provision to occur each time a mark is used in commerce in the way Congress described, with no need for any actual confusion. Under step two of our extraterritoriality standard, then, “use in commerce” provides the dividing line between foreign and domestic applications of these Lanham Act provisions. 

 

5 Both provisions “refer to a `likelihood' of harm, rather than a completed harm.” Moseley v. V Secret Catalogue, Inc., 537 U.S. 418, 432 (2003). In other words, “actual confusion is not necessary in order to prove infringement.” Restatement (Third) of Unfair Competition §23, at 250, Comment b (1993); accord, id., §23, at 251, Comment d; 4 J. McCarthy, Trademarks and Unfair Competition § 23:12, at 23–157 (5th ed. 2023) (McCarthy) (“ `It is black letter law that actual confusion need not be shown to prevail under the Lanham Act, since . . . the Act requires only a likelihood of confusion' ”). Instead, the provisions treat confusion as a means to limit liability to only certain “bona fide use[s] of a mark in the ordinary course of trade.” 15 U. S. C. § 1127 (defining “use in commerce”); see Patent and Trademark Office v. Booking.com B. V., 591 U.S. –––, ––– (2020) (“A competitor's use does not infringe a mark [under §1114(1)(a) and § 1125(a)(1)] unless it is likely to confuse consumers”).

 

When a claim involves both domestic and foreign activity, the question is whether “`the conduct relevant to the statute's focus occurred in the United States.'” Nestlé, 593 U.S., at ––– – –––. If that “`conduct . . . occurred in the United States, then the case involves a permissible domestic application' of the statute `even if other conduct occurred abroad.’” WesternGeco, 585 U.S., at –––. But “if the conduct relevant to the focus occurred in a foreign country, then the case involves an impermissible extraterritorial application regardless of any other conduct that occurred in U.S. territory.” RJR Nabisco, 579 U.S., at 337; see, e.g., WesternGeco, 585 U.S., at –––; Nestlé, 593 U.S., at ––– – –––; Morrison, 561 U.S., at 266–267, 271–273.

 

In nearly all countries, including the United States, trademark law is territorial—i.e., “a trademark is recognized as having a separate existence in each sovereign territory in which it is registered or legally recognized as a mark.” 5 McCarthy §29:1, at 29–4 to 29–5. Thus, each country is empowered to grant trademark rights and police infringement within its borders. See, e.g., ibid.; Ingenohl v. Olsen & Co., 273 U.S. 541, 544 (1927); A. Bourjois & Co. v. Katzel, 260 U.S. 689, 692 (1923).

 

This principle has long been enshrined in international law. Under the Paris Convention for the Protection of Industrial Property, July 14, 1967, 21 U. S. T. 1583, T. I. A. S. No. 6923, a “mark duly registered in a country of the Union shall be regarded as independent of marks registered in other countries of the Union,” and the seizure of infringing goods is authorized “on importation” to a country “where such mark or trade name is entitled to legal protection.” Arts. 6(3), 9(1), id., at 1639, 1647.

 

Because of the territorial nature of trademarks, the “probability of incompatibility with the applicable laws of other counties is so obvious that if Congress intended such foreign application `it would have addressed the subject of conflicts with foreign laws and procedures.'” Morrison, 561 U.S., at 269.

 

Secondary Sources: McCarthy, Trademarks and Unfair Competition § 23:12, at 23–157 (5th ed. 2023).

 

 

(U.S. Supreme Court, June 29, 2023, Abitron Austria GmbH v. Hetronic Int’l, Inc., Docket No. 21-1043, 600 U.S. 412, J. Alito)

 

 

Georgia Supreme Court, Edible IP, LLC v. Google, LLC, Docket No. S21G0798

Internet Law

 

Internet Search Algorithms

 

Keyword Advertising Program

 

Advertisement

 

Trade Name

 

Trademark

 

Goodwill

 

Third Party’s Right to Use a Trade Name

Civil Theft of Personal Property

Conversion

 

Trademark Infringement

 

Failure to State a Claim

 

“Money Had and Received” ((Common Law) Unjust Enrichment))

 

Georgia Law

 

 

 

This case involves Google LLC’s application of internet search algorithms, which it uses to auction off search terms for profit to advertisers, and the interests of Edible IP, LLC, which seeks to exercise control over the profit generated from its trade name and associated goodwill. In 2018, Edible IP brought an action against Google arising from Google’s monetization of the name “Edible Arrangements” without permission in its keyword advertising program. Google moved to dismiss the complaint, or in the alternative, to compel arbitration. The trial court granted the motion, dismissing the complaint on several grounds, including that it failed to state a claim, and alternatively compelling the parties to arbitration. Edible IP appealed from that order, and the Court of Appeals affirmed the dismissal for failure to state a claim. See Edible IP, LLC v. Google, LLC, 358 Ga. App. 218 (854 SE2d 565) (2021). We granted certiorari to address whether the trial court properly granted Google’s motion to dismiss. For the reasons that follow, we conclude that Edible IP has not stated a cognizable claim for relief and therefore affirm.

 

The Court of Appeals summarized the relevant facts underlying this appeal as follows:

The complaint alleges that Edible IP owns the trademarks, trade names, and other intellectual property associated with Edible Arrangements, a business consisting of websites and “brick-and-mortar” franchises that sell, among other things, floral-shaped arrangements of fresh-cut fruit. To support these websites and franchises, Edible IP licenses the use of its intellectual property to various entities. Edible IP, however, maintains ownership of the intellectual property, which includes the trademark/trade name “Edible Arrangements,” as well as the goodwill generated by the brand.

 

Google operates an internet search engine that allows individuals to search for information by typing relevant words into a search bar. Using algorithms that analyze the search terms and requested information, Google returns “organic” results of the query on a results page. According to the complaint, Google monetizes its search engine by “selling . . . ‘keywords’” to advertisers that “trigger advertisements on the search results page when Google users search for the keyword term.”

 

Keyword advertising is purchased through an auction-like process, with prospective advertisers bidding on terms suggested by Google. The auction includes general terms like “shoes” and “mother’s day gift,” as well as trade names such as “Edible Arrangements.” Google has never contracted with Edible IP for the right to use the Edible Arrangements trade name, and Edible IP has not otherwise given Google permission to include its trade name in the keyword advertising program. Nevertheless, Google began auctioning the trade name to advertisers in approximately 2011. As described by the complaint, Google places advertisements purchased through the keyword program “in a more attractive location on the results page than its ‘organic’ results in an effort to drive consumer behavior and get those consumers to click on the ad rather than Google’s ‘organic’ results.”

 

Based on these and other allegations, Edible IP sued Google for theft of personal property, conversion, money had and received, and civil Racketeer Influenced and Corrupt Organizations (“RICO”) violations. Google moved to dismiss the complaint, arguing that any claims alleged by Edible IP needed to be arbitrated, that a forum selection clause deprived the trial court of personal jurisdiction over Google, and that the complaint failed to state a claim upon which relief could be granted.

 

Google also requested that the trial court compel the parties to arbitration. 

Edible IP has alleged four claims: (1) civil theft of personal property; (2) conversion; (3) money had and received; and (4) violations of Georgia’s RICO Act. We will address each of the claims in turn.

 

a.   Civil Theft of Personal Property

Georgia law authorizes the owner of property to bring a civil action to recover damages from any person who either (1) willfully damages the owner’s personal property or (2) commits a theft as defined in OCGA § 16-8-2. See OCGA § 51-10-6 (a).

 

In its complaint, Edible IP (…), alleging that “Google has committed theft by taking, in violation of OCGA § 16-8- 2” by “unlawfully taking and otherwise appropriating Edible IP’s property by selling that property without permission to others and keeping the proceeds for itself.” Edible IP identified the property as its “trade name ‘Edible Arrangements’ and the good will and reputation associated with that name.”

 

(…) We are, thus, first required to determine whether Edible IP’s trade name and associated goodwill are “property” within the meaning of the civil theft statute and, if so, the contours of the associated property rights and whether Edible IP has sufficiently alleged that Google has wrongfully “appropriated” this property.

 

(…) “Goodwill” has been defined as “essentially the positive reputation that a particular business enjoys. This ‘positive reputation’ manifests itself as an expectancy that a business has of continued patronage from its customer.” 38 Am. Jur. 2d Good Will § 1. See also Armstrong v. Atlantic Ice & Coal Corp., 141 Ga. 464, 466 (81 SE 212) (1914) (“Good will is the favor which the management of a business wins from the public, and the probability that old customers will continue their patronage and resort to the old place.” (citation omitted)); Goodwill, Black’s Law Dictionary (11th ed. 2019) (defining goodwill as “a business’s reputation, patronage, and other intangible assets that are considered when appraising the business”).

 

We have expressly recognized that goodwill is a type of intangible property interest. See Nat. Assn. for Advancement of Colored People v. Overstreet, 221 Ga. 16, 29 (4) (a) (142 SE2d 816) (1965) (“It is uniformly recognized that good will is a species of property and constitutes a valuable asset of the business of which it is a part.” (citation omitted)). See also Reis v. Ralls, 250 Ga. 721, 723 (1) (301 SE2d 40) (1983) (“It appears clear that in addition to a trademark, a trade name, along with the goodwill it represents, may be the subject of an Article 9 security interest.”).

 

Construing these factual allegations in favor of Edible IP for the purpose of analyzing Google’s motion to dismiss, as we must, Edible IP has sufficiently alleged a property interest in the trade name “Edible Arrangements” and its associated goodwill within the meaning of OCGA § 51-10-6.

 

(…) Under each of these statutes, it is clear that trade names are only protected from use by others to the extent that such use is deceptive or there is a likelihood of confusion by the public.

 

Here, Edible IP has not alleged that Google’s use of the “Edible Arrangements” trade name in its keyword advertising program causes any confusion, and in fact, has disclaimed in the complaint that it is “seeking any . . . relief for any consumer confusion.” Thus, we see no basis in Georgia statutory law for Edible IP’s claim that Google has appropriated the “Edible Arrangements” trade name simply by using it in Google’s algorithms and keyword advertising programs.

 

And although Edible IP disclaims asserting any federal trademark claim, a review of federal trademark law is instructive on the contours of a third party’s right to use a trade name. Like Georgia statutory law and the common law, federal trademark law offers only limited trademark and trade name protection. For example, the doctrine of fair use permits reference to a competitor’s trade name in an advertisement.

 

(…) We see no reason to extend civil theft in Georgia to encompass the mere use of a trade name, without implicating consumer confusion, when doing so would subvert Georgia trademark law, federal trademark law, and the common law of trademark infringement.

 

(…) In sum, given Edible IP’s express disavowal of the element of consumer confusion in the complaint, it cannot state a claim for civil theft arising from the use of its trade name and associated goodwill.

 

Accordingly, the trial court did not err in granting Google’s motion to dismiss Edible IP’s claim for civil theft.

 

b. Conversion

Although Georgia law may provide relief for the conversion of certain intangible property, we have never extended that tort to claims based on the mere use of a trademark or on trade name infringement, and we decline to do so now.

 

Again, the cases Edible IP relies upon are readily distinguishable. For example, in English & Sons, Inc. v. Straw Hat Restaurants, Inc., 176 FSupp.3d 904 (N.D. Cal. 2016), the court concluded that the plaintiffs had “converted” the defendant’s trademark and other intellectual property by wrongfully registering ownership of the trademark with theU.S. Patent and Trademark Office – not just by simple use. See id. at 923 (2).

 

Other courts have likewise rejected attempts to expand the tort of conversion to encompass the type of intangible property traditionally protected within the scope of trademark law. See, e.g., Ortega v. Burgos, Case No. 12-CV-05421, 2014 U.S. Dist. LEXIS 70457, at *3 (II) (E.D.N.Y. May 22, 2014) (dismissing trademark conversion claim because “not only has this Court been unable to find any authority that recognizes trademark conversion, the leading treatise on trademark law states that, ‘every court to consider such a claim has rejected it’” (citation omitted)). See also 4 McCarthy, supra, § 25:9.50 (“Occasionally, a trademark owner will allege, either along with or instead of a traditional infringement claim, that its mark has been ‘converted’ by defendant. Every court to consider such a claim has rejected it. The author agrees that the tort of ‘conversion’ should not be stretched and deformed to substitute for the traditional law of trademark infringement.”).

 

Accordingly, we cannot say that the trial court erred in concluding that Edible IP had failed to state a claim for conversion.

 

c. Money Had and Received

In Count 3 of its complaint, Edible IP asserts a claim for money had and received, alleging that Google currently holds a sum of money belonging to Edible IP. The common law action for money had and received “is founded upon the equitable principle that no one ought to unjustly enrich himself at the expense of another.” Sentinel Offender Services, LLC v. Glover, 296 Ga. 315, 331 (4) (a) (766 SE2d 456) (2014) (citation omitted). This action “is maintainable in all cases where one has received money under such circumstances that in equity and good conscience he ought not to retain it.” Id. (citation and punctuation omitted).

 

Edible IP’s claim for money had and received again relies on its unavailing assertion that, rather than selling advertising space, Google is in essence selling Edible IP’s trade name and illegally profiting from it. And, despite Edible IP’s insistence that our courts have previously held that “the fact that money was received from a third person will not affect a defendant’s liability,” this holding does not change the futility of Edible IP’s claim for money had and received because Edible IP has no claim to the profits that Google has earned by selling advertising. Accordingly, for this reason and for the reasons discussed above in Divisions 1 (a) and (b), Edible IP cannot, as a matter of law, show that it is entitled to profits that Google earns through its keyword advertising program (even if the program uses the trade name “Edible Arrangements”) or that Google has been unjustly enriched at Edible IP’s expense, and this claim likewise fails.

 

 

Secondary sources: J. Thomas McCarthy, Conversion of a Trademark, 4 McCarthy on Trademarks and Unfair Competition, § 25:9.50 (5th ed. 2019) 

 

 

 

 

(Georgia Supreme Court, Feb. 15, 2022, Edible IP, LLC v. Google, LLC, Docket No. S21G0798)

U.S. Court of Appeals for the Second Circuit, OMEGA SA, SWATCH SA v. 375 CANAL, LLC, Docket No. 19-969-cv

 

Trademark

Swatch, Omega

Contributory Infringement

Theory of Willful Blindness (‘Knows or Has Reason to Know’)

 

Admission of evidence of alleged infringement of non-plaintiff brands

Omega elected to receive only statutory damages, which is an option the Lanham Act provides to address the problem facing a plaintiff unable to prove actual damages.

 

 

Defendant 375 Canal, LLC (“Canal”), appeals from a judgment entered June 12, 2019, awarding $1.1 million in statutory damages to Plaintiff Omega SA for Canal’s contributory infringement of Omega’s trademarks, arising from sales of counterfeit Omega watches at Canal’s property in Manhattan. Canal challenges the district court’s denial of Canal’s pretrial motion for summary judgment, the jury instructions on the elements of contributory infringement, several evidentiary rulings, and the scope of the permanent injunction. We reject Canal’s arguments on all issues. We dismiss Canal’s appeal of the denial of summary judgment and affirm the judgment and injunction.

 

We nevertheless reach the merits of Canal’s trademark arguments via its appeal of the jury instructions, and we reject Canal’s position as inconsistent with our precedent in Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93 (2d Cir. 2010). In Tiffany, we held that a defendant may be liable for contributory trademark infringement if it was willfully blind as to the identity of potential infringers—that is, under circumstances in which the defendant did not know the identity of specific infringers. Id. at 109-10. That holding precludes Canal’s argument that Omega needed to identify a specific infringer to whom Canal continued to lease property. At trial, Omega pursued a theory of willful blindness, and the district court’s jury instructions accurately captured Tiffany’s requirements. We therefore reject Canal’s challenges to those instructions.

 

(…) Also in 2006, Louis Vuitton Malletier sued Canal for counterfeiting activities at 375 Canal Street. Canal entered into a consent order permanently enjoining Canal from violating Louis Vuitton’s trademarks, requiring Canal to post signs for two years stating that the sale and purchase of counterfeit Louis Vuitton items is illegal, and allowing walk-throughs by Louis Vuitton representatives. See Order for Permanent Injunction on Consent, Louis Vuitton Malletier v. Canal Assocs., L.P., No. 1:06-cv-306 (S.D.N.Y.), ECF No. 4 (Jan. 17, 2006).

 

(…) In September 2011, counsel for Swatch SA (which owns Omega) sent a letter to Albert Laboz, one of Canal’s owners, informing him of the December 2010 arrest at 375 Canal Street and stating, “As the owner of this premise [sic] with the ability to oversee and control the tenants residing within, you can be found liable for the conduct of your tenants. This includes contributory and vicarious liability for the sale of counterfeit products.” J. App’x 2681. Canal’s counsel responded in October 2011 by email stating that the tenant in question had “apparently ... sublet the space to an entity that was selling counterfeit goods bearing your clients’ trademarks,” and Canal claimed that it had “been informed that the tenant had the offending tenant removed.” J. App’x 2692. At trial, however, Omega put forward evidence that the ejection may not have occurred until 2012 and that Canal did not act between 2010 and 2012 to stem counterfeiting, such as by posting anti-counterfeiting signs, conducting walk-throughs, or inspecting the property for hidden compartments that could contain counterfeit goods.

 

In May 2012, an Omega private investigator visited 375 Canal Street and documented his purchase of a counterfeit Omega Seamaster watch, which precipitated this lawsuit.

 

In September 2012, Omega sued Canal for contributory trademark infringement, alleging that Canal had continued to lease space at 375 Canal Street despite knowing that vendors at the property were selling counterfeit Omega goods.

 

After discovery, Canal moved for summary judgment, contending that Omega had not identified a specific vendor to whom Canal continued to lease property despite knowing or having reason to know that the specific vendor was selling counterfeit goods. In opposition, Omega argued that it did not need to identify a specific vendor because Omega’s primary theory was one of willful blindness: Canal could not avoid liability by shielding itself from learning the identities of the vendors who were selling counterfeits.

 

On December 22, 2016, the district court denied Canal’s motion, agreeing with Omega that under this court’s decision in Tiffany, 600 F.3d 93, Omega was not required to identify a specific vendor to whom Canal continued to lease its property despite knowledge of counterfeiting by that vendor. Omega SA v. 375 Canal, LLC, No. 12- CV-6979, 2016 WL 7439359, at *3 (S.D.N.Y. Dec. 22, 2016), reconsideration granted in part on other grounds, 324 F.R.D. 47 (S.D.N.Y. 2018); see also Omega SA v. 375 Canal, LLC, No. 12-CV-6979, 2013 WL 2156043, at *4 (S.D.N.Y. May 20, 2013) (addressing the same issue when denying an earlier motion to dismiss).

 

The Lanham Act does not expressly create liability for contributory trademark infringement, but the Supreme Court has concluded that “liability for trademark infringement can extend beyond those who actually mislabel goods with the mark of another.” Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 853 (1982).

 

We nevertheless review the substance of Canal’s trademark arguments via its challenge to the district court’s jury instructions on contributory infringement. As noted above, Canal insists that the district court erred by not instructing the jury that Omega had to prove that Canal continued to lease space to a specific, identified vendor that it knew or should have known was selling counterfeit Omega goods. We reject Canal’s argument, which conflicts with this court’s opinion in Tiffany, 600 F.3d 93.

 

In Tiffany, we affirmed a bench trial verdict that eBay had not engaged in contributory trademark infringement. Private sellers had used eBay’s website to sell counterfeit Tiffany products, and eBay promptly removed listings that it identified as selling counterfeits; eBay also formed a team to identify and remove such listings proactively. Tiffany, 600 F.3d at 97-100. Nevertheless, eBay was unable to eliminate the sale of counterfeit Tiffany goods on the website. We affirmed the district court’s verdict that there was no contributory infringement, noting that “Tiffany failed to demonstrate that eBay was supplying its service to individuals who it knew or had reason to know were selling counterfeit Tiffany goods.” Id. at 109.

 

Canal relies on the portion of Tiffany that describes contributory trademark infringement as occurring when the defendant “continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement,” id. at 108 (emphasis in original) (quoting Inwood, 456 U.S. at 854), meaning that the defendant must be aware of “particular sellers” whom it “knew or had reason to know were selling counterfeit [plaintiff] goods,” id. at 109.

 

Canal argues that the district court’s jury instructions failed to follow these requirements by allowing for liability without a showing that Canal continued providing services to a specific vendor suspected of infringement. But Canal is wrong that actual knowledge of a specific infringer is required in all cases. In the course of holding that the plaintiff must identify particular sellers suspected of counterfeiting, Tiffany explained that evidence of willful blindness would also suffice: “A service provider is not, we think, permitted willful blindness. When it has reason to suspect that users of its service are infringing a protected mark, it may not shield itself from learning of the particular infringing transactions by looking the other way.” A defendant may be willfully blind either to particular transactions or to the identities of infringers: “If eBay had reason to suspect that counterfeit Tiffany goods were being sold through its website, and intentionally shielded itself from discovering the offending listings or the identity of the sellers behind them,” we said, “eBay might very well have been charged with knowledge of those sales sufficient to satisfy Inwood’s ‘knows or has reason to know’ prong.”

 

Tiffany’s discussion of willful blindness confirms that a defendant may be held liable for contributory trademark infringement despite not knowing the identity of a specific vendor who was selling counterfeit goods, as long as the lack of knowledge was due to willful blindness. Tiffany therefore precludes Canal’s argument that Omega was required to identify a specific individual or entity to whom Canal continued to lease its property despite knowing or having reason to know of infringement by that same individual or entity.

 

Canal insists that the verdict below portends widespread liability even for innocent actors. But Tiffany made clear that contributory trademark infringement based on willful blindness does not create liability simply because of a defendant’s “general knowledge as to counterfeiting on its” property, or because a defendant “failed to anticipate that others would use its service to infringe a protected mark”. Tiffany provided a test for identifying which scenarios could result in liability: “Contributory liability may arise where a defendant is ... made aware that there was infringement on its site but ... ignored that fact.” There is no inherent duty to look for infringement by others on one’s property. Indeed, the district court’s jury instructions correctly stated that Canal had no affirmative duty to police trademarks.

 

But where a defendant knows or should know of infringement, whether that defendant may be liable for contributory infringement turns on what the defendant does next. If it undertakes bona fide efforts to root out infringement, such as eBay did in Tiffany, that will support a verdict finding no liability, even if the defendant was not fully successful in stopping infringement. But if the defendant decides to take no or little action, it will support a verdict finding liability. See Coach, Inc. v. Goodfellow, 717 F.3d 498, 505 (6th Cir. 2013) (upholding liability because the defendant knew or had reason to know of infringement yet continued to lease vending space “without undertaking a reasonable investigation or taking other appropriate remedial measures”). The jury, properly instructed, reasonably found that the latter scenario occurred here.

 

Accordingly, we reject Canal’s challenges to the jury instructions on contributory liability.

 

(…) The defendants object to the admission of evidence of alleged infringement of non-plaintiff brands, arguing that this evidence was also irrelevant and unduly prejudicial because the plaintiff failed to show that the non-plaintiff goods were actually counterfeit. Yet the jury reasonably could have inferred that even mere allegations of counterfeit sales of non-plaintiff products should have alerted the defendants to watch out for infringement of plaintiff’s brands, so this evidence was relevant to the jury’s determination of liability. Luxottica, 932 F.3d at 1319-20.

 

Canal also fails to explain how it suffered prejudice. It argues that it was not permitted to offer evidence showing that “Omega would have been unable to prove actual damages.” Appellant’s Reply Br. 23-24. But Omega elected to receive only statutory damages, which is an option the Lanham Act provides “to address the problem facing a plaintiff unable to prove actual damages.” Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 110 (2d Cir. 2012). Given that statutory damages were necessarily in lieu of actual damages in this case, Canal cannot show that it was prejudiced by not being allowed to offer evidence refuting an actual-damages claim that Omega did not pursue.

(The award is by law capped at $2 million “per counterfeit mark per type of goods or services sold” where the “use of the counterfeit mark was willful.” 15 U.S.C. § 1117(c)(2)).

 

 

(U.S. Court of Appeals for the Second Circuit, Jan 6, 2021, OMEGA SA, SWATCH SA v. 375 CANAL, LLC, Docket No. 19-969-cv)

U.S. Court of Appeals for the Seventh Circuit, Charles Curry v. Revolution Laboratories, LLC, Docket No. 17-2900

Trademark Infringement

First Use in Commerce

Advertisement and Sale

Unfair Competition

E-Commerce

E-Mail

Online Contacts with a Forum

Subject Matter Jurisdiction

Personal Jurisdiction

Purposefully directed activities at a forum even in the “absence of physical contacts” with a forum

Supplemental Jurisdiction (State and Federal Claims)

Venue

Illinois Law

Illinois Long-Arm Statute

Contract Drafting

The district court had subject matter jurisdiction over Mr. Curry’s four claims “arising under” federal statutes related to trademarks and unfair competition. See 28 U.S.C. §§ 1331, 1338(a)–(b). With regard to Mr. Curry’s remaining three claims for fraud, unfair competition, and trademark infringement arising under state law, amicus counsel for Mr. Curry submits that subject matter jurisdiction exists over those claims as well because the state and federal claims share a “common nucleus of operative fact.” United Mine Workers v. Gibbs, 383 U.S. 715, 725 (1966), and they are part of the “same case or controversy.” 28 U.S.C. § 1367(a). We agree. Thus, the district court had supplemental jurisdiction over the state claims. See Ammerman v. Sween, 54 F.3d 423, 424 (7th Cir. 1995) (“A loose factual connection between the claims is generally sufficient.”).

Charles Curry is the founder and Chief Executive Officer (“CEO”) of a company named “Get Diesel Nutrition” that sells dietary supplements to fitness enthusiasts and athletes. Mr. Curry contends that the “essence” of his brand is “Diesel.” Indeed, he has adopted the alter ego “Chuck Diesel,” and his company name, website address, and the product at issue, Diesel Test, all contain the word “Diesel.” He has paid for advertising for his products, including Diesel Test, in nationally distributed fitness magazines since 2002. He first manufactured Diesel Test in March 2005 and has advertised the product since June 2005. Diesel Test received awards from Planet Muscle magazine in 2015 and 2016.

In October 2016, the defendants began to sell the product that is at the heart of Mr. Curry’s complaint; the defendants’ product is a sports nutritional supplement branded Diesel Test Red Series, All Natural Testosterone Booster. Like Mr. Curry’s Diesel Test product, the defendants’ product comes in red and white packaging with right-slanted all-caps typeface bearing the words “Diesel Test.”

The defendants admittedly sold their product exclusively online through the following websites: (1) www.revlabs.com; (2) www.boostedtestforyou.com; (3) www.amazon.com; and (4) www.ebay.com. Although the defendants did not sell their product until 2016, they claimed in advertisements that their product was ranked “Best Product and Number 1” in 2015. The defendants have not denied that they concocted a fake ESPN news webpage and created a fake ESPN article touting their product. The defendants conducted all their marketing and advertising for their product through the Internet. In just over seven months, they received more than $1.6 million in gross sales from their product. At least 767 of the sales were to consumers in Illinois.

Mr. Curry promptly demanded that the defendants cease and desist selling their product. The defendants responded and said that they wished to find an “amicable resolution.” On November 15, Mr. Curry sent a second email to Revolution in which he renewed his claims and instructed them to contact his attorney. Two weeks later, however, Joshua Nussbaum, President of Revolution, filed a trademark appli- cation for the Diesel Test mark to be used in connection with dietary and nutritional supplements. In the trademark application, Mr. Nussbaum, as signatory, declared that “he believes that to the best of his knowledge and belief, no other persons ... have the right to use the mark in commerce.” He further indicated on the application that the “filing base” was “Intent to Use.” At the time he filed this application, however, the defendants already were selling their product in commerce bearing the Diesel Test mark.

On December 9, 2016, Mr. Curry filed a federal trademark application for the Diesel Test mark for dietary and nutritional supplements indicating that he had first used the mark in commerce in April 2005. The United States Patent and Trademark Office (“USPTO”) suspended the processing of both applications, citing a likelihood of confusion between the defendants’ and Mr. Curry’s marks.

(…) Federal law protects trademarks even if the owner has not yet sought federal registration.

(…) According to these affidavits, “Revolution does not hold itself out to do business in Illinois” on its website. Although Revolution lists on its website several companies where its products can be purchased, none of the listed companies are located in Illinois. It is not disputed that the defendants (1) are not registered to do business and do not have a registered agent in Illinois; (2) do not have a place of business in Illinois, a telephone, or a mailing address in Illinois; (3) do not have any employees located in Illinois or any who have traveled to Illinois for business; (4) do not have any real or personal property in Illinois; and (5) have never attended any trade shows or participated in any business- related meetings in Illinois.

(…) Specifically, the defendants contended that jurisdiction was not proper over Revolution because, “while Revolution does have some minimal sales to Illinois, those sales represent only 1.8% of Revolution’s total gross sales nationwide.”

(…) Because this case involves claims under both federal law and state law, the district court’s jurisdiction rested on a federal question, 28 U.S.C. § 1331, and supplemental jurisdiction, 28 U.S.C. § 1367. In a case involving federal question jurisdiction, “a federal court has personal jurisdiction over the defendant if either federal law or the law of the state in which the court sits authorizes service of process to that defendant.” Mobile Anesthesiologists Chicago, LLC v. Anesthesia Assocs. of Houston Metroplex, P.A., 623 F.3d 440, 443 (7th Cir. 2010). The only federal statute under which Mr. Curry brings his claims is the Lanham Act, which does not authorize nationwide service of process. See be2 LLC v. Ivanov, 642 F.3d 555, 558 (7th Cir. 2011). Thus, “a federal court sitting in Illinois may exercise jurisdiction over the defendants in this case only if authorized both by Illinois law and by the United States Constitution.” Id. (citing Fed. R. Civ. P. 4(k)(1)(A)). The Illinois long-arm statute provides that “a court may also exercise jurisdiction on any other basis now or hereafter permitted by the Illinois Constitution and the Constitution of the United States.” 735 ILCS 5/2-209(c). We have held that “the Illinois long-arm statute permits the exercise of jurisdiction to the full extent permitted by the Fourteenth Amendment’s Due Process Clause.” Tamburo v. Dworkin, 601 F.3d 693, 700 (7th Cir. 2010). Thus, the question we must answer is whether the exercise of personal jurisdiction over the defendants “comports with the limits imposed by federal due process.” Walden v. Fiore, 571 U.S. 277, 283 (2014); Mobile Anesthesiologists, 623 F.3d at 443 (noting that “there is no operative difference between” the constitutional limits of the Illinois Constitution and the United States Constitution in terms of subjecting a defendant to personal jurisdiction).

(…) For the exercise of specific jurisdiction over an out-of-state defendant: First, the defendant’s contacts with the forum state must show that it “purposefully availed itself of the privilege of conducting business in the forum state or purposefully directed its activities at the state. Second, the plaintiff’s alleged injury must have arisen out of the defendant’s forum-related activities. And finally, any exercise of personal jurisdiction must comport with traditional notions of fair play and substantial justice.

(…) We also note that, although Revolution’s sales of the allegedly infringing product to Illinois consumers all took place through either its interactive website or a third party’s website, we consistently have declined “to fashion a special jurisdictional test for Internet-based cases.” Tamburo, 601 F.3d at 703 n.7. “We think that the traditional due process inquiry ... is not so difficult to apply to cases involving Internet contacts that courts need some sort of easier-to-apply categorical test.” Illinois v. Hemi Grp. LLC, 622 F.3d 754, 759 (7th Cir. 2010).

We first examine whether Revolution’s activity can be characterized as purposefully directed at Illinois, the forum state. Revolution has no physical presence in Illinois. Our cases make clear, however, that physical presence is not necessary for a defendant to have sufficient minimum contacts with a forum state. Indeed, we have noted that the “purposeful-direction inquiry ‘can appear in different guises.’” Tamburo, 601 F.3d at 702 (quoting Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1071 (10th Cir. 2008)). The essential point of the inquiry is to “ensure that an out-of-state defendant is not bound to appear to account for merely ‘random, fortuitous, or attenuated contacts’ with the forum state.” Dudnikov, 514 F.3d at 1071 (quoting Burger King, 471 U.S. at 475).

The principal approach employed to ensure that a defendant’s contacts with a state are not random, fortuitous, or attenuated is to inquire whether the record demonstrates that the defendant has “‘purposefully directed’” his activities at a forum even in the “absence of physical contacts” with a forum. Burger King, 471 U.S. at 476 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774–75 (1984)). Such “purposeful direction” may be shown by evidence that the defendant’s actions, even if initiated outside of the forum state, nevertheless were directed at the forum state. For example, a defendant may cause its product to be distributed in the forum state. See, e.g., Keeton, 465 U.S. at 774–75 (finding purposeful direction where defendant published magazines outside the forum state and circulated them in the forum state). Among our recent cases, Hemi is particularly instructive. There, the State of Illinois sued Hemi Group LLC (“Hemi”) for selling cigarettes to Illinois residents in violation of state law and for failing to report the sales in violation of federal law. Hemi was based in New Mexico; it “was not incorporated or organized under Illinois law, it was not registered to do business in Illinois, it did not have any offices or employees in Illinois, it did not bank in Illinois, and it had not advertised in print media in Illinois.” Hemi, 622 F.3d at 755–56. Hemi sold its cigarettes through its websites, and the complaint identified only one Illinois resident, a special senior agent of the Illinois Department of Revenue, who had purchased cigarettes from Hemi through its websites. This agent had purchased over three hundred packs of cigarettes from Hemi over the course of two years. Id. at 755.

We held that Hemi’s contacts with Illinois were sufficient to support personal jurisdiction in that state. We based our decision in part on Hemi’s maintenance of “commercial websites through which customers could purchase cigarettes, calculate their shipping charges using their zip codes, and create accounts.” Id. at 757–58. Because Hemi “knowingly did do business with Illinois residents ... , Hemi’s argument that it did not purposefully avail itself of doing business in Illinois rang particularly hollow.” Id. at 758.

(…) The Supreme Court has held that an out-of-state insurer who sold only a single policy within the state is subject to personal jurisdiction within the state at least with respect to a cause of action related to that policy. See McGee v. Int’l Life Ins. Co., 355 U.S. 220, 222 (1957).

We are satisfied that Revolution has formed sufficient minimum contacts with Illinois. Like Hemi, Revolution sells its products only online through its website and third-party websites. Revolution’s interactive website for the sale of its products requires the customer to select a shipping address. Illinois is among the “ship-to” options from which the customer must choose. Illinois residents purchasing Revolution’s products also receive an email from Revolution thanking them for their business, confirming their order, and listing the Illinois shipping address. Revolution admittedly sold its Diesel Test product to 767 Illinois residents between October 14, 2016, and June 1, 2017.

(…) See Hemi, 622 F.3d at 758; uBid, 623 F.3d at 428 (stating that defendant’s argument that its sales to Illinois residents were merely “automated transactions unilaterally initiated by those residents” was not persuasive because those “customers ... are not simply typing their credit card numbers into a web form and hoping they get something in return”; the defendant “itself set the system up this way”).

In the face of this sales arrangement, it is not persuasive to say that Revolution did not exploit the Illinois market simply because its advertising was not especially aimed at that state. See uBid, 623 F.3d at 428–29. There is no per se requirement that the defendant especially target the forum in its business activity; it is sufficient that the defendant reasonably could foresee that its product would be sold in the forum. See Keeton, 465 U.S. at 781. In Keeton, the Supreme Court upheld the exercise of personal jurisdiction even though the defendant magazine publisher had not targeted specifically the forum. The Court determined that, with a nationwide market, the publisher reasonably should have anticipated that it could be held accountable in the forum state for activities arising from the “substantial number” of sales in the forum state. Id. In Hemi, we concluded that personal jurisdiction was proper irrespective of the fact that Hemi “had not advertised in print media in Illinois.” Hemi, 622 F.3d at 756. Revolution’s nationwide advertisements were accessible in Illinois.

Significant caution is certainly appropriate when assessing a defendant’s online contacts with a forum “to ensure that a defendant is not haled into court simply because the defendant owns or operates a website that is accessible in the forum state.” Hemi, 622 F.3d at 760. Here, however, Revolution’s 767 sales of Diesel Test to Illinois residents provides solid evidence that Revolution has “purposely exploited the Illinois market.” be2, 642 F.3d at 558 (collecting cases). These sales certainly distinguish Revolution from “the defendant that merely operates a website, even a ‘highly interactive’ website, that is accessible from, but does not target, the forum state.” Id. at 559 (collecting cases).

The proper exercise of specific jurisdiction also requires that the defendant’s minimum contacts with the forum state be “suit-related.” Advanced Tactical, 751 F.3d at 801 (quoting Walden, 571 U.S. at 284). There must be a “connection between the forum and the specific claims at issue.” Bristol-Myers Squibb, 137 S. Ct. at 1781. “Even regularly occurring sales of a product in a State do not justify the exercise of jurisdiction over a claim unrelated to those sales.” Goodyear, 564 U.S. at 931 n.6.

We held that Advanced Tactical failed to establish personal jurisdiction. Real Action’s email to its customer list, which included customers in Indiana, could not support jurisdiction because, we explained, any connection between the lawsuit and where the email was opened would be “entirely fortuitous.” Although Real Action made at least one sale to an Indiana resident, Advanced Tactical did not provide evidence that the sale had any connection to the underlying claims of trademark infringement. No evidence, for example, suggested that Indiana residents saw Real Action’s email or website before purchasing products from Real Action. “The only sales that would be relevant,” we explained, “are those that were related to Real Action’s alleged unlawful activity,” and Advanced Tactical did “not provide evidence of any such sales.” We emphasized in Advanced Tactical that the defendant’s contacts with the forum state must be related to the plaintiff’s claims to support specific personal jurisdiction. Advanced Tactical, 751 F.3d at 801.

Mr. Curry, on the other hand, certainly has met his burden. Unlike the sales in Advanced Tactical, which were made by the defendant in the forum state but were not related to the claims underlying the suit, Mr. Curry has shown that the direct sales that Revolution made in Illinois involved Diesel Test, a product that bears the allegedly infringing trademark that forms the very basis of this action. Mr. Curry submits that Revolution participated in the Illinois market by selling its product in a manner that would lead the consumer to confuse Revolution’s product with his. The gravamen of his case is that Revolution’s advertisement and sale of its product in the national market caused confusion and consequently deprived Mr. Curry of the value of his trademark in those states, including Illinois, where the product was sold.

(…) Advanced Tactical cannot be read as requiring, at this stage of the litigation, anything more. As we have just noted, Revolution’s sales are inextricably linked to the alleged tortious activity underlying Mr. Curry’s claims. By contrast, the allegations of trademark infringement in Advanced Tactical appear to be based solely on statements made on the defendant’s website about its affiliations. The sales in the forum state therefore did not have, as the court noted, any relevance to the allegations of the complaint. Notably, Advanced Tactical made no attempt to limit our earlier decision in Hemi, which had upheld an assertion of personal jurisdiction based on sales of cigarettes to one individual in the forum state.

(U.S. Court of Appeals for the Seventh Circuit, February 10, 2020, Charles Curry v. Revolution Laboratories, LLC, Docket No. 17-2900)